Amazon seeks govt nod to set up food e-retail venture in India with investment of $500 million

This will allow the Seattle-based e-commerce titan to stock locally-produced food items and sell them online, making it the first foreign retailer to enter the segment.Chaitali Chakravarty&Rasul Bailay | ET Bureau | February 03, 2017, 16:30 IST

NEW DELHI: Amazon has applied to the government to invest $500 million in a wholly-owned venture in India that will allow the Seattle-based e-commerce titan to stock locally produced food items and sell them online, becoming the first foreign retailer to enter the segment.

Amazon currently operates an e-commerce marketplace and although India allows 100 per cent overseas capital in such platforms, these entities cannot sell products themselves. The government, in a landmark liberalising policy in the February 2016 budget, allowed 100 per cent foreign investment in retailing of processed foods made in India.

Amazon has filed its application with DIPP, which handles foreign investment in retailing and e-commerce, said a person familiar with the development. The company plans to invest $500 million over five years and could start selling locally-produced food items within six months of obtaining approval, the person said.

“We are excited by the government’s continued efforts to encourage FDI in India for a stronger food supply chain,” an Amazon spokesperson said. “We have sought an approval to invest and partner with the government in achieving this vision.”

Amazon’s application will be considered a showpiece for the government, which has so far been unable to attract foreign retailers and manufacturers after approving the food-retailing policy aimed at helping farmers and creating jobs.

Only hyperlocal grocery delivery companies Big-Basket and Grofers have applied under this category. According to sources, Walmart Stores Inc was not interested in setting up outlets to sell only thin-margin food stuff and wanted the scope of products to be widened to include non-food items. Big-Basket applied late last year to invest Rs 100 crore in the food-retailing venture.

India notified the 2016 budget announcement in June, creating the food-only retailing segment and allowing 100 per cent FDI for companies selling locally sourced and produced food items through both brick-and-mortar stores and their online portals. After the lacklustre response to the showpiece regulation, the government tried to drum up investments by inviting companies including Walmart, Nestle, Heinz and Thailand’s CP Foods to seek their feedback and investment plans. Minister for food processing industries Harsimrat Kaur Badal, the proponent of FDI in food retailing, led a team of officials to London last year and met representatives of British companies including Tesco, Sainsbury’s, Harrods, Marks & Spencer and Cobra Beer to drum up support for the policy without any luck.

Amazon currently operates an online platform on which Indian-owned entities can sell products. Flipkart, the country’s largest ecommerce company and Snapdeal also operate such platforms.